Fuel Price Increase Delayed For Now

On Friday night, March 30, 2012, in an eleventh-hour reprieve, the Indonesian national legislature effectively vetoed a raise in the cost of gasoline by 33% scheduled for April 1st.

Meeting until the early hours of Saturday, a full-sitting of the House of Representatives (DPR) struck a compromise with the national leadership to allow fuel prices to increase if the price of Crude Oil exceeds assumption stipulated in the National Budget by more than 15% for a period of at least six months.

The deliberations in the DPR were punctuated by frequent breaks to allow lobbying and consultation among and between political factions in the House. Meanwhile, outside, on the streets of the Capital and the rest of Indonesia, protests, sometimes marked by violence, were taking place. At one point during the day, angry protestors managed to breach the walled fortifications and police lines surrounding the DPR.

In the face of protests and legislative deliberations, a planned trip by Indonesia’s President Susilo Bambang Yudhoyono canceled a trip to Phnom Penh to attend an ASEAN leader’s summit, allowing the Vice-President to attend in his stead.

The price hike in fuel, claimed by the government as essential to reduce crippling fuel-price subsidies where the price of premium gas remains 75% below the world average price, became highly politicized. The PDI-P, Gerinda and Hanura parties stubbornly refused to entertain arguments on behalf of a price increase.

The 2012 State Budget assumes a Crude Oil price of US$105 per barrel.

As reported by The Jakarta Globe the price of Indonesian Crude was $109.25 per barrel in October 2011, rising in November to $112.94, December saw a price decrease to $110.70, January at $115.90, February at $122.17 and March at $128.

According to the new government-established "trigger" for a domestic increase in fuels costs, a price of US$135 a barrel for April would clear the way for a price hike as early as May. That price would bring the average price of Indonesian Crude over the preceding six months to US$120.75, passing the threshold required for higher prices at the fuel pumps.